ComfortDelGro - Maybank Research 2022-07-15: Slowly But Surely; Re-Rating On The Cards

COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Slowly But Surely; Re-Rating On The Cards

ComfortDelGro (SGX:C52) has been a relative laggard (+1.4% year-to-date) compared to other reopening plays. We believe the market will re-rate the stock once ComfortDelGro is able to consistently deliver core EPS growth, driven by better operating leverage. In our view, this should come on the back of recovery in ridership across its key geographies, and continued declines in fuel prices.

Last month, ComfortDelGro Corporation Australia announced it has clinched a 6-year contract worth AUD220mil as the sole operator of public bus transport services in Darwin. It covers a significant part of the Northern Territory’s public transport network, with 170 vehicles operating across more than 180 bus routes.
Separately, ComfortDelGro is acquiring Irish coach operator GoBus for EUR12mil, making it the 3rd-largest inter-city coach operator in the country. This will comprise a fleet of 31 buses and 3 inter-city coach routes, which have been experiencing robust commuter demand in recent months with easing restrictions.
Overall, our forecasts are unchanged given the minimal earnings impact.

Meanwhile, SBS Transit (SGX:S61) continues to see recovery in average daily rail ridership to > 1mil in Jun 2022 (+3.4% m-o-m, +76.7% y-o-y). This is equivalent to around 83% of pre-pandemic levels after relaxation of safe-management measures, and more employees return to the office full time. We see a similar trend for point-to-point trips, which has seen higher passenger demand in tandem with improving social mobility.
Despite the emergence of omicron subvariants, we do not think the government will tighten COVID-19 rules as Singapore is now more prepared to handle outbreaks.

Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2022-07-15

SGX Stock Analyst Report BUY MAINTAIN BUY 1.760 SAME 1.760